Services offered by the Forensic Accountants

    Chapter Progress:

    After the media hype about the forensic accounting profession due to the corporate frauds like Enron, Worldcom and Satyam, the demand for forensic accountants have suddenly grown up. India would need more forensic accountants than ever due to three important reasons

    1. Salary premium over the other accountants and auditors
    2. Increase in the number of financial statement frauds in India
    3. Complexity of the tasks performed during the investigations leading to higher risks for the forensic accountants.

    Apart from the litigation support there are many other tasks that a forensic accountant performs during the tenure of the assignment. There are various different service lines where the forensic accountant can play an important role.

    Investigation consultancy

    While financial statement scandals of Xerox, WorldCom have brought forensic accounting into limelight it accounts for only one fifth of total work. Corporate investigations into expense and purchasing frauds are the hot cake followed by the siphoning of funds also being relatively frequent.

    Due to the increased sophistication of fraud and the requirement of prior experience in conducting fraud investigations, organizations have begun to realize that it is best for an expert who is independent and unbiased to conduct an investigation.

    The overall objectives in a typical investigation are to

    • Investigate and determine if the alleged material financial irregularities and/or improprieties have occurred
    • Attempt to quantify whether or not any of these alleged financial irregularities resulted in a monetary loss
    • Attempt to identify persons who could be responsible for the aforesaid irregularities and/or improprieties

    These kinds of services are required by the Banks, Corporate and Regulators such as RBI, SEBI and law enforcement officials.

    Fraud Risk Assessment

    Operational Risk is an integral part of business. Managing the risk of fraud is a crucial and integral part. The upcoming regulations BASEL-II accord and the Sarbanes Oxley Act are the bi products of Fraud risk. A fraud risk assessment is aimed at creating an environment that frustrates the fraudster. Interaction of the clients with the Fraud Risk experts helps to leverage off the knowledge of the cultural and working environment and also the industry knowledge. This approach allows for an immediate buy-in on the recommendations made, as the client himself has been a part of the risk assessment exercise. The corporate kings of our county require these services.

    Due Diligence

    Due diligence enable the clients to enter a foreign market or open a foreign operation; seek new sources of capital; recruit new dealers, franchisees, or distributors; license their product or services to another company; establish a strategic alliance or joint-venture partnership; invest in a business; acquire or merge with another business; appoint directors; extend credit. These kinds of investigations can also be carried out with the aid of the forensic accountant.

    Information Security Risk Assessment

    Information security is the buzzword of the new era. It includes formulating policies, practices and procedures to prevent any loss of sensitive and confidential information. These services address the concerns of clients in respect of safeguarding their critical information against unethical and illegal attempts by rivals and interested parties. Forensic accountants with technology exposures are the best-fit candidates for the role of the Information security assessment. In USA Sarbanes Oxley act has compelled the companies to get assessed their Information security systems. Generally software companies prefer the technology forensic accountants.

    Asset Tracing

    Stamp Paper scam was the biggest scandal amounting to over 30,000 crores of rupees. However when Telgi was arrested he had assets worth few billions of Rupees.

    The tracing of the bank transactions convertible into the tangible asset is important since the assets are sold out to repay the losses. Understanding the bank transfers is a technical job which has to be looked with the suspicion. Involvement of Benami Transactions into the creation of assets makes it even more difficult for the law enforcement officials to recover the assets.

    Tracing and identifying client assets that are in the unlawful possession or control of third parties is the area that is looked after by Forensic Accountants worldwide.

    When a loss arising from fraud is detected, an organisation has the option of turning to forensic accountants to trace the assets created out of the illegal proceedings.

    Vendor monitoring

    Companies who are involved in the production and marketing of consumer products internationally have become increasingly aware of the importance of monitoring the labour and business practices of their vendors.  Similarly the bankers in our country are also tracking their borrowers with full concentration. There are not less incidences where the companies across the world have duped the banks in the working capital loans.

    Money laundering compliance

    In the wake of Prevention of Money Laundering Act’2002 the compliance program is the need of an hour. Money Laundering is a serious crime associated directly with the terrorism

    The compliance program may address four areas:

    • Compliance regulations
    • Designation of a Compliance officer
    • Independent Testing
    • Training

    This programme provides our clients with a highly trained, motivated and diligent work force. It further gives them the comfort of proof that they have been diligent, in their compliance programme.

    Litigation Support

    The renowned Forensic accountants provide opinions on technical questions of audit, accounting, taxation or other areas. It may also involve quantification of losses in the context of fraud, disputed business valuations, loss of profits, insurance claims, and intellectual property disputes and in many other situations.

    Functional Consultancy

    The software companies have developed the internal audit tools for the compliance with the SOX provisions. Similarly a pre-defined set of the rules for identification of the red flags of the frauds in software is not far away. To design such softwares the functional consultants with Forensic Accounting Background are preferred. To sum up the forensic accounting field is the boom of tomorrow in the field of accountancy. The collapse of Enron gave birth to Sarbanes Oxley Act and also proved to be a boom time for the forensic accountants. Mishaps worldwide also increase the demand of forensic accountants.